Examples of the difference between operating lease and financial lease

The difference between financial leasing and operating leasing;

It can be understood that the purpose of financial leasing is to own fixed assets, but because of its high value, this installment payment method is adopted. Therefore, in accounting, although the enterprise has not yet obtained its ownership, it is still listed as an enterprise asset for accounting and management.

The rental fee paid is included in the value of fixed assets.

As for operating leased fixed assets, the purpose of leasing is only to meet the needs of temporary production and operation, so it is not the assets of the enterprise, and the enterprise does not conduct accounting and management, but only pays rent. The rental fee paid is included in the manufacturing cost or management cost according to the purpose.

For example:

For example, operating lease is similar to renting a house, and the rent is paid monthly; Direct lease of financial lease is similar to mortgage to buy a house, and the mortgage payment is paid monthly; The leaseback of financial leasing is similar to taking a house as a mortgage and repaying it in monthly installments.

From this comparison, we can see that the biggest difference between financial leasing and operating leasing lies in whether the ownership is transferred and the position of the corresponding fixed assets and rents in the financial statements. Fixed assets leased by financing can be included in the balance sheet and depreciated. Rent is used to repay long-term payables. Fixed assets leased from business do not enter the balance sheet, and rent is calculated according to expenses.

The biggest difference between direct lease and mortgage is that the ownership of the former belongs to the lessor, and the lessee only has the right to use and the right to income; The ownership of the latter belongs to the buyer during the mortgage period, but the ownership is accompanied by other rights, namely the mortgage of the bank.

Extended data:

Financing lease:

It is the most common and basic form of non-bank finance in the world. It means that the lessor enters into a supply contract with a third party (supplier) at the request of the lessee (user), and according to this contract, the lessor contributes to the purchase of the equipment selected by the lessee. At the same time, the lessor enters into a lease contract with the lessee, leases the equipment to the lessee, and collects a certain rent from the lessee.

Financial leasing means that the lessor purchases the leased property from the supplier and rents it to the lessee according to the specific requirements of the lessee and the choice of the supplier. The lessee pays the rent to the lessor by installments. During the lease period, the ownership of the leased property belongs to the lessor, and the lessee has the right to use the leased property.

If there is no agreement or unclear agreement on the ownership of the leased property after the lease term expires, the rent has been paid, and the lessee has fulfilled all the obligations as stipulated in the financial lease contract, it can be supplemented by agreement; If a supplementary agreement cannot be reached, it shall be determined in accordance with the relevant provisions of the contract or trading habits. If it is still uncertain, the ownership of the leased property belongs to the lessor.

Financial leasing is a new financial industry integrating financing and financial services, trade and technological innovation. Because of the combination of financing and finance, the leasing company can recycle and dispose of the leased property when there are problems, so the requirements for corporate credit and guarantee are not high when handling financing, which is very suitable for financing of small and medium-sized enterprises.

Operating lease:

It is a leasing business in which the leasing department of a large production enterprise or a professional leasing company rents our products to users. The lessor generally has its own leased warehouse, and once the lessee requests it, it can directly lease the equipment to the user. The user pays the rent according to the lease and returns the equipment after the lease expires.

Operating lease is an "incomplete payment" lease arranged to meet the needs of the lessee for temporary or seasonal use of assets. This is a pure traditional lease. The lessee leases assets only to meet the short-term, temporary or seasonal needs of the business, and has no intention of increasing assets.

Operating lease generally refers to all other forms of lease except financial lease. A lease whose remaining economic life is less than 25% of its estimated economic life on the lease start date is also regarded as an operating lease, regardless of whether it meets other conditions for financial leasing.

Operating lease is a leasing business in which the leasing department of a large production enterprise or a professional leasing company rents our products to users. The lessor generally owns its own leased goods warehouse, and once the lessee requests it, it can directly lease the equipment to the user for use. At the same time, the lessor can also provide maintenance services for the lessee.

The user pays the rent according to the lease and returns the equipment after the lease expires. This lease method is suitable for projects with short lease term and rapid technology update. During the lease period, the contract can be terminated and the equipment can be returned, but the rent is relatively high. Because of this way, the lessor must lease the equipment for many times in a row in order to recover the investment of the equipment and make a profit.

References:

Baidu Encyclopedia: Financial Leasing Baidu Encyclopedia: Operating Leasing